Government could face enormous challenge

If talks failIf the summit fails, it would fall to the Government to make a fresh attempt to broker a deal when it takes over the six-month rotating presidency of the EU in January.

In European circles it is readily acknowledged that this would present an enormous challenge.

Already the main threat to the summit is the uncompromising stance of British prime minister David Cameron. If he is unable to move now for domestic political reasons, the argument goes that he would be even more hemmed in when negotiations resume.

Officials in Brussels are quietly discussing the prospect of an alternative approach if a second attempt at a seven-year deal fails. This would involve an annual rollover of the existing budget framework with any increases or decreases subject to negotiation at this time of year every year.

Budget rollover benefit

That is messy politically. The reason EU leaders decided to opt for multi-year budgets was that they were frustrated with repeated fights every year over the same budget questions. The benefit from a practical perspective of rolling over the budget is that no individual government would have a veto. Such a budget could be adopted by qualified majority, meaning any naysayer would have to align with like-minded leaders to form a blocking minority.

Some of Mr Cameron’s many critics in Brussels argue that this approach would still leave London contributing more to the EU budget in the long run than might be the case in a seven-year deal.

However, close observers in the Tory party argue that this might be the only viable approach for Cameron.

Such an outcome would have the benefit of preserving Britain’s EU budget rebate, which London believes to be under threat in the current talks. (Rebates or refunds paid to other net contributors are not in the same category.) The big drawback here is that the EU authorities would still have to enact new laws for programmes such as cohesion and the Common Agricultural Policy to continue.

The legal basis for these initiatives lapses next year when the current budget round comes to an end, meaning difficult negotiations would still be in store. Embarking down this path would also compromise the effort to recast and modernise the EU budget, gradually moving the emphasis away from agriculture and the like to initiatives to promote research and boost investment in energy and transport.